Question
In: Economics
Suppose a person has utility function, prices, and income: u(aA,B)= 4A+B, PB=3 and m=24. Draw her...
Suppose a person has utility function, prices, and income: u(aA,B)= 4A+B, PB=3 and m=24. Draw her demand curve and explain
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Suppose a person has utility function, prices, and income: U(a,B) = 2 ln(A) + ln(B), Pb=1...
Suppose a person has utility function, prices, and income:
U(a,B) = 2 ln(A) + ln(B), Pb=1 and m=12. Draw her price offer curve
and explain. Hint: it may be useful to think about the number of
B's she purchases as Pa changes.
Suppose that Elizabeth has a utility function U= (or U=W^(1/3) ) where W is her wealth...
Suppose that Elizabeth has a utility function U= (or U=W^(1/3) )
where W is her wealth and U is the utility that she gains from
wealth. Her initial wealth is $1000 and she faces a 25% probability
of illness. If the illness happens, it would cost her $875 to cure
it.
What is Elizabeth’s marginal utility when she is well? And when
she is sick? Is she risk-averse or risk-loving?
What is her expected wealth with no insurance?
What is...
A home owner has a utility function of U (m) = √m, where m is income....
A home owner has a utility function of U (m) =
√m, where m is income. The home owner is
considering buying flood insurance because they live near a river
that has flooded in the past. If it is a dry year, she will have an
income of $60,000 to spend on other things. If it is a rainy year
and there is a flood, then she has to pay for repairs to her house.
Then her income will only...
) A person’s utility function is U = 50F0.8B0.6 for goods F and B with prices...
) A person’s utility function is U =
50F0.8B0.6 for goods F and B with prices
PF = $4 and PB = $1 and income Y =
$140. Marginal utilities of F and B are:
MUF =
40F-0.2B0.6 and MUB =
30F0.8B-0.4
Graph the budget constraint (with F on the horizontal axis, B
on vertical axis.) Document the intercepts (numerically)
and slope of constraint.
Calculate the utility-maximizing choices of F and
B. Show on your graph.
PF decreases to $2. Find the new
utility-maximizing...
Suppose a person has the utility function U=x^.75 and makes $52,000. If he gets the flu,...
Suppose a person has the utility function U=x^.75 and makes
$52,000. If he gets the flu, he will have to miss work for a week,
costing him $1,000. His probability of getting the flu is 15%.
Compare the following scenarios and rank his preferences over
them:
His current situation
Participate in the company’s sick day program where $500 of his
salary is withheld (regardless of whether he gets sick) but if he
gets sick for a week he doesn’t loose...
Cleopatra spends all her money on bags (B) and shoes (S). Her utility function is U(B,...
Cleopatra spends all her money on bags (B) and shoes (S). Her
utility function is U(B, S) = 2B0.5S
0.5
. Her income is
$150. Price of shoes is pS = 2. Price of bags depends on the number
of bags purchased. Bags cost $5 each if she purchases
between 1 and 8 bags. If she purchases more than 8 bags, the price
falls to $2 for all subsequent books.
(a) Draw Kleopatra's budget constraint where bag is on the...
Cleopatra spends all her money on bags (B) and shoes (S). Her utility function is U(B,...
Cleopatra spends all her money on bags (B) and shoes (S). Her
utility function is U(B, S) = 2B^0.5S^0.5 . Her income is $150.
Price of shoes is pS = 2. Price of bags depends on the number of
bags purchased. Bags cost $5 each if she purchases between 1 and 8
bags. If she purchases more than 8 bags, the price falls to $2 for
all subsequent books. (a) Draw Kleopatra's budget constraint where
bag is on the horizontal...
Suppose that an individual has a utility function of the form U = Y½ where U...
Suppose that an individual has a utility function of the form U
= Y½ where U is utility and Y is income.
a) Calculate the utility level for Y values of $10,000,
$40,000, $90,000, $160,000, and $250,000 and then plot the
individual’s total utility function.
b) This individual is currently earning $90,000 but has
a 50-50 chance of earning either $40,000 or $160,000 in a new
job.
i) Calculate the expected income and utility from the
new...
Suppose an individual makes $50,000 of income per year. Her utility function is given by u=10x0.5, where x is her income minus expenses.
Suppose an individual makes $50,000 of income per year. Her
utility function is given by u=10x0.5, where x is her
income minus expenses. She realizes that there is about a 5%
probability that she may suffer a heart attach in any given year.
The cost of treatment will be $40,000 if a heart attack occurs.She has the option of buying health insurance for $2,000 per
year, which will cover all expenses in case of a heart attack.
Should she buy...
Question 1 Jon Snow consumes pizza and burgers. His utility function is u(P, B) = PB...
Question 1 Jon Snow consumes pizza and burgers. His utility
function is u(P, B) = PB where P is the number of pizzas and B is
the number of burgers. Jon Snow has $30 to spend, and he plans to
spend it all on pizza and burgers. The price of one pizza is $10
and the price of one burger is $3.
(a) Find and label Jon Snow’s initial optimal bundle on a graph
where pizza is on the x-axis...
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